Shares in Franklin Resources (NYSE:BEN), also called Franklin Templeton, are dropping 4.5% in Wednesday morning trading after Goldman Sachs analyst Alexander Blostein reinstated coverage of the asset manager with a Sell rating as its “outsized EPS risks” overshadow its inexpensive multiples.
“While we are encouraged by BEN’s recent pivot toward Alternative strategies, which should over time result in more sustainable organic growth, we believe trends in BEN’s Traditional products are deteriorating at a meaningful pace and will overshadow potential growth benefits from Alt platforms (Lexington, BSP, Clarion, among others),” the analyst wrote in a note to clients.
Specifically, he sees Franklin Resources’ (BEN) equity franchise facing a rapid decline in excess performance and flows, driving the company’s long-dated organic decay an estimated 4%-7% over the next 12-18 months and keeping the stock’s multiple under pressure.
12-month price target of $23 is based on 7.8x Q5-Q8 price/earnings multiple. Blostein holds a generally negative view on traditional asset managers.
In the past year, BEN shares have dropped 28% compared with the S&P 500’s 9.4% decline and peers BlackRock (BLK) -29%, T. Rowe Price (TROW) -41%, and AllianceBernstein (AB) -9.5% as seen in this chart.
For an opposing view on BEN, SA contributor Individual Trader as the company’s valuation and free cash flow numbers “remain compelling”